News
Philippines creates Panda stir
Bonds Sovereign surprises with very tight pricing as offshore buyers dominateBY INA ZHOUThe REPUBLIC OF THE PHILIPPINES
shook up the Panda bond
market with an exceptionally
tight debut that underscored
the growing role of overseas
investors in onshore renminbi
financings.
The Baa2/BBB/BBB rated
sovereign priced the Rmb1.46bn
(US$230m) 5.0% three-year notes
in China’s interbank market
at the low end of 5.0%–5.6%
indicative guidance.
In a first for the Panda
market, most of the bonds went
to overseas buyers, helping
the Philippines smash through
pricing expectations and leaving
other issuers scrambling to
understand the achievement.
Offshore investors took an
auspicious 88% of the notes.
Final pricing represented
a spread of only about 35bp
over the three-year notes of
China Development Bank,
rated Aa3/AA– (Moody’s/S&P),and no premium at all over
the Rmb10bn three-year issue
of Central Huijin, a unit of
sovereign wealth fund China
Investment Corp, also priced at
5% last week.
Of the five sovereign Panda
bond issuers so far, only South
Korea (Aa2/AA/AA-), rated five
to six notches higher than the
Philippines, has priced at a
tighter spread over CDB.
Less than two months
ago, the government of the
Emirate of Sharjah, rated A3/
BBB+ (Moody’s/S&P), offered a
103bp premium over CDB for
its Rmb2bn three-year Panda at
5.80%.
The other two sovereign
issuers, Poland (A2/BBB+/A–)
and Hungary (Baa3/BBB–/BBB–),
paid 60bp and 83bp over CDB,
respectively.HOME SUPPORT
The stunning pricing was
the result of overwhelming
offshore demand via the BondConnect link, which gives
international investors direct
access to China’s domestic
market from Hong Kong.
Sovereign wealth funds and
Philippine banks contributed
significantly to the offshore bid,
according to market sources.
“It is likely that Philippines
banks supported the sovereign
deal, just like Chinese banks
back their sovereign deals,” said
a DCM banker away from the
deal.
Orders came in much
stronger than expected after
books opened last Tuesday,
according to sources familiar
with the matter.
“The issuer was confident
about demand, following the
roadshow the previous week.
Still, the momentum of the
bookbuilding far exceeded our
expectations,” said one of the
sources.
The offering was 6.3 times
covered with Rmb9.2bn of
orders, the biggest book andthe largest oversubscription of
any of the sovereign Pandas to
date.
The final allocation to
Chinese onshore investors
was just over 10%. Onshore
bids made up half of the total
order book, but most of them
were outpriced by offshore
accounts, sources said. Further
distribution statistics were not
available.
“The Philippines is a frequent
issuer in the international
market and it hadn’t issued
offshore bonds with tenors of
less than 10 years [recently].
So, its first three-year offering
found demand among offshore
investors,” said a banker on the
deal.
The Panda bonds even
managed to priced inside the
Philippines’ US dollar curve.
The 5.0% yield swapped to a
hypothetical 3.0% yield in US
dollars, according to traders,
while the sovereign’s US dollar
4.0% 2021s were bid at 3.15%Tech bonds pushback 06 HKBN amends and extends 07 Diverging tenors 08